Traditionally, a person in need of a loan, such as a mortgage, goes to a lending institution, such as a local bank. There he/she is met with a lending officer of the bank who gives an introduction of the loans that are offered by the bank. The prospective borrower will be asked about the amount of the loan he desires and certain preliminary financial information about the borrower (e.g. gross household income). If the lending officer is satisfied with borrower's answer, he will ask the borrower to formally fill out an loan application and submit it to the bank.
The loan application submitted by the prospective borrower will normally be reviewed by the underwriting department of the bank, which qualifies the borrower for the loan. The information contained in the loan application is first checked to see if it is accurate. If the requested loan is a mortgage, a local real property appraiser will be hired to inspect and appraise the property that is to be mortgaged. The underwriting department will then decide, in accordance with lending guidelines of the bank or of a mortgage organization such as FannieMae, whether or not the prospective borrower is qualified for the loan. Alternatively, instead of itself qualifying the borrower, the bank may pay a secondary mortgage underwriter, such as FannieMae, to qualify a prospective borrower.
A loan is granted to the prospective borrower if the bank determines, in accordance with the above-described procedure, that the borrower is qualified. Otherwise, the prospective borrower will be denied of the loan.
In this traditional way of obtaining a mortgage, the choice of lending institutions is rather limited--they are generally located within the community of the borrower. Moreover, in order to compare loans offered by different lending institutions, the borrower needs to individually contact each of the lending institutions. It is preferred that more lending institutions, not limited by their geographical locations, could participate in offering a loan/mortgage to a prospective borrower.
In addition to the traditional way of obtaining a mortgage, borrower may seek the services of a mortgage broker. A mortgage broker assists the borrower in identifying the types of loan best suited to the borrower and the amount of funds required. The mortgage broker then contacts several lenders to establish the current pricing for desired loan, and presents a list of loan options to the borrower. The mortgage broker then assists the borrower in selecting a lender and subsequently applying for the loan.
The drawbacks for obtaining a mortgage through a broker is that (1) a mortgage broker can only contact a limited number of local lenders; (2) mortgage broker service is very time consuming and consequently expensive; (3) dealing with mortgage broker is limited to regular business hours; and (4) quality of mortgage brokers varies.
It is therefore an object of the present invention to provide a system for conducting an electronic loan auction wherein a loan desired by a prospective borrower is auctioned off to a large number of lending institutions; and
It is a further object of the present invention that such electronic loan auction be conducted by using a computer network or networks, such as the Internet, which is accessible to a great number of prospective borrowers, as well as a great number of prospective lenders.